Page 10B —
COLORADO REAL ESTATE JOURNAL
— September 16-October 6, 2015
Spotlight
enver’s office market
continued its trend
of robust expan-
sion, with steadily
declining vacancy, solid net
absorption and a well-planned
development pipeline, through
the second quarter of 2015.
Vacancy fell to 13.5 percent
from 14.8 percent year-over-
year and from 13.8 percent in
the previous quarter. This is
the lowest level since 2000 and
well below the 35-year aver-
age of 18.1 percent. Quarterly
net absorption totaled 593,495
square feet, and year-to-date
net absorption reached 1.1 mil-
lion sf.
The central business district’s
strong run was interrupted this
quarter by oil and gas company
closures and downsizing, total-
ing 180,000 sf, and Bridgepoint
Education’s downsizing. These
losses drove quarterly net
absorption of negative 199,105
sf, and vacancy increased to
12.7 percent from 12 percent in
the previous quarter. The price
and supply of oil are being
watched closely in Denver
and in other markets with oil
and gas exposure. However,
Denver’s CBD has a diverse
tenant mix that will insulate
against a reprise of the oil and
gas bust of the 1980s. Several
large leases are poised to drive
future growth. Transamerica
(121,000 sf) and Liberty Global
(70,000 sf) will relocate from
the southeast suburban sub-
market, and Prologis (72,000 sf)
will move from the northeast
submarket. Co-working space
provider WeWork recently
announced its first Denver lease
totaling 72,000 sf in the CBD.
The NW submarket saw
a continuation of last year’s
strong performance in the first
half of 2015. Vacancy plum-
meted to
13.8 percent,
falling 536
basis points
from year-
end 2013.
This repre-
sents the
lowest level
since 2000.
Quarterly net
absorption
was 147,476
sf, driven
mainly by the
latest round
of expansion
by SCL Health, which occupied
an additional 105,000 sf at the
Oracle Campus.
The SES submarket domi-
nated the market in 2013 but
ended 2014 in the red due to
First Data downsizing sig-
nificantly and Charles Schwab
vacating two full buildings in
a move to its own campus. The
SES quickly returned to expan-
sion mode in 2015 and logged
the market’s second-strongest
performance in the second quar-
ter of 2015. Quarterly absorp-
tion was 212,450 sf, bringing
year-to-date absorption to
327,514 sf. Vacancy decreased
140 basis points to 12.5 percent
from 13.9 percent at year-end
2014. The quarter’s largest
move-in was Travelport’s reloca-
tion to 120,000 sf at Panorama
Corporate Center V. The SES is
expected to post robust positive
absorption in 2015 and 2016
as the vacant Charles Schwab
space is backfilled and expan-
sion is driven by continued
growth in financial services,
professional and business ser-
vices and homebuilding-related
sectors.
Class A and Class B direct
rental rates (median, full ser-
vice) in the core submarkets
continued to set new all-time
highs: CBD Class A rates rose
23.7 percent from year-end
2009 to $35.25 per sf, and Class
B rates increased 20 percent to
$27 per sf. Similarly, SES Class
A rates rose 23.8 percent to $26
per sf, as Class B rates experi-
enced a 27.3 percent increase to
$21 per sf.
Denver’s office investment
market posted total sales in
excess of $2 billion in 2013
and again in 2014, the best
performances since 2007,
and this trend continues. In
second-quarter 2015, sales
totaled 2.3 million sf valued
at $400 million, which brings
Denver’s year-to-date office
sales to 5.8 million sf total-
ing $1.1 billion. The quarter’s
top sale was KBS’ purchase
of Village Center Station I for
$76.7 million, which equates
to $327 per sf, a new record for
a multitenant suburban office
building sale in Denver on a
per sf basis. Denver continues
to be a hotbed for equity place-
ment, particularly in areas
with speculative construction
– Lower Downtown and Skyline
in the CBD and River North in
Midtown. These micromarkets
are seeing rising rental rates,
compressed cap rates, new
record prices and abundant
capital chasing limited inven-
tory, with off-market transac-
tions becoming more common.
These trends are beginning in
the SES and NW submarkets
and are expected to continue as
new investment capital enters
the Denver market and inves-
tors focus more on the suburbs
due to a shortage of opportuni-
ties and stiff competition in the
CBD.
Denver’s strong economy and
market fundamentals have
opened a development window
– 14 office projects, totaling 2.8
million sf, are currently under
construction or renovation. This
represents the largest develop-
ment pipeline since 2006.
The future looks bright for
Denver’s economy and office
market. Now in the middle of
its sixth year, this sustained
growth has resulted in absorp-
tion totaling 7.7 million sf and
a steadily decreasing vacancy
rate, down to 13.5 percent from
20 percent at year-end 2009.
Denver’s enviable economic
fundamentals and quality of life
are a draw for both millennials
and companies that seek to hire
them. This dynamic is driving
the explosive development of
emerging neighborhoods, such
as River North, which are
attracting creative businesses
in search of nontraditional or
co-working space. The stage is
set for continued expansion in
2015 and beyond.
D
Lauren
Douglas
Newmark Grubb
Knight Frank
Denver Metro BOMA hosts monthly membership meetings, educational courses, seminars
and networking events throughout the year. Our Trade Show and Golf Tournament are both
an annual success, along with our celebrations of the best buildings and professionals in the
commercial real estate industry. For more information on upcoming events please go to www.
bomadenver.org or call the BOMA office at 303-383-4870.
September 25, 2015
NEW BOMI High-
Performance Building
Sustainability Principles
Be the first to earn this desig-
nation and enjoy the savings!
Denver Metro BOMA has
partnered with the Denver
City Energy Project (DCEP)
to offer BOMI International’s
new High-Performance (HP)
education program to further
improve the competencies—
knowledge, skills, and abilities
needed to perform key job
functions—of industry profes-
sionals who are responsible
for implementing sustainable
initiatives.
October 14, 2015
BOMA Annual Membership
Meeting
11:00 - 11:30 a.m.:
New Member Orientation
11:30 a.m. - 1:00 p.m.:
Program & Lunch
Wellshire Event Center
November 6, 2015
The Outstanding Building of
the Year (TOBY) Awards
6:00 – 11:00 p.m.
Seawell Grand Ballroom
December 9, 2015
BOMA Holiday Luncheon
11:00 - 11:30 a.m.:
New Member Orientation
11:30 a.m. - 1:00 p.m.:
Program & Lunch
Wellshire Event Center
Calendar of Events
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and information or details on upcoming events, get the
very latest information and conversation on BOMA’s
social media sites. Joining is easy, simply become a fan/
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